Small states are vulnerable to the effects of the global financial crisis because of their high dependence on foreign direct investment, the importance for them of export earnings, and high levels of remittances and aid flows. The crisis thus also in turn affects investment and private sector development.

This Economic Paper examines the effects of the crisis on three countries: Mauritius, St Lucia and Vanuatu. Only Vanuatu is relatively resilient so far, with the effects on investment in Mauritius and St Lucia being dramatic, though affecting different sectors in each country. The policy responses followed also differ markedly. The authors demonstrate once again the vulnerability of small states to shocks, and emphasise that they are often at the receiving end of global policies, particularly so in the context of the global financial crisis. They argue that more could be done to clarify and address the greater vulnerability of many small states.

5. Global Policies, the Global Financial Crisis and Private Sector Development in Small States
5.1 The G-20 and small states
5.2 The UN and small states
5.3 The IMF, World Bank, European Commission and small states
5.4 Why does this matter for investment and private sector development?
6. Conclusions and Implications

Titles by authors

Presents quantitative evidence of the effectiveness of aid for trade, the initiative to promote development by providing resources targeted at boosting involvement in international trade by developing countries. This work suggests which types of aid for trade measures are likely to be particularly effective.

Small states face serious challenges for development due to their size, remoteness and vulnerability. This work suggests how small states can reposition themselves in the global economy and move into knowledge-based and service industries. It provides an overview of factors constraining the development of services sector and trade in services.

Aid for Trade has been an integral part of ODA since the WTO 2005 Ministerial. This volume of 16 papers provides a comprehensive review of the AfT initiative, examining effectiveness, current issues and future directions including an alternative way to improve trade for developing countries from Nobel Prize-winning economist Joseph Stigliz.

This Economic Paper presents the first analyses of the use and effectiveness of Aid for Trade (AfT), the initiative to help developing countries boost their involvement in the global economy. It examines the extent to which SVEs have been able to access AfT funds and to what extent this assistance has helped them to improve their trade performance.